Fed's Rosengren cites risk of sharp U.S. unemployment drop

NEW YORK, May 9 (Reuters) - Unemployment in the United States has dropped below its natural equilibrium and could overheat the economy and prompt faster interest-rate hikes if it were to drop below 4 percent, a Federal Reserve policymaker said on Tuesday.

Boston Fed President Eric Rosengren, in a speech that reiterated concerns about high U.S. real estate prices , said the current jobless rate at 4.4 percent has already fallen below his 4.7-percent estimate of "natural employment." This theoretically is the lowest level possible before wage pressures push inflation too high.

He cited a survey in which private economists give a 10 percent chance of unemployment falling below 4 percent. "Such an overheated economy would likely be accompanied by higher inflation, which in turn would likely elicit higher interest rates," he said at a commercial real estate conference.

Rosengren, who has pushed for rate hikes over the last year but does not vote again on policy until 2019, did not comment specifically on monetary tightening. The Fed has raised rates twice since December in part due to the strong labor market.

"Policymakers looking to reform the GSEs might look at the GSEs' large and growing footprint in the market and ask whether this level of government-sponsored exposure is safe, and whether that level of government support is appropriate," he said at New York University Stern School of Business.

"A potential and significant shock to this sector of the commercial real estate market could occur if proposals require the GSEs to reduce their holdings of multifamily loans." (Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)